Citi picks AIA for Asia distribution deal

Camilla Hall and Alistair Gray
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Citigroup has picked AIA Group as its partner in a multi-billion-dollar distribution deal that will allow the Asian life insurer's products to be sold through the U.S. bank's network across the region, people familiar with the matter said.

If successfully integrated, the deal is set to become one of the biggest bank-based insurance distribution arrangements in Asia, allowing both companies to capitalize from rising premiums in the region's emerging markets.

The agreement, expected to be announced on Thursday, will give broader reach to AIA, unlocking access to Citi's more than 560 branches in the region and boosting sales in fast-growing Asian markets.

(Read more: Insurance agents feeling left out of Obamacare)

The publicly traded Asian life group was among five insurers – MetLife of the US, London-based Prudential, Canada's Manulife Financial and FWD Group of Hong Kong – to have bid for the distribution deal.

The arrangement, set to generate billions of dollars in revenue, was offered by Citi – one of the top international bank distribution platforms in Asia – as global insurers increasingly count on banks' distribution networks.

Adam Jeffery | CNBC

Citi declined to comment. AIA could not be reached for comment outside Hong Kong working hours.

Bancassurance, as such deals are known, only became popular in Asia in the early 2000s but have since grown to take an important slice of the market.

Other prominent deals have included a tie-up between Standard Chartered and Prudential. The bank broadened its partnership with the Pru in Asia in 2008, offering a platform to sell life insurance, health and Takaful Islamic insurance products.

In Asia, the bancassurance industry has seen significant deal activity in the past few years, including Sun Life Financial's and Khazanah's deal to buy Aviva's Malaysian insurance join-venture earlier this year.

(Read more: Asians still hugely under insured: AIA CEO)

AIA President: Asia foothold to underpin growth

Even so, the bancassurance model, originally a Franco-Belgian concept, has been criticized in recent years because the latest regulatory reforms make it less attractive for insurance and banking businesses to be combined.

The latest tie-up may generate an exclusivity payment from AIA to Citi in a boost for the bank, one person familiar with the process said.

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AIA has operations in 17 markets in Asia-Pacific. It serves holders of more than 27 million individual policies as well as over 16 million participating members of group insurance schemes.

Citi's Asian consumer bank generated $1.9 billion in revenues in the third quarter, just under half of the bank's international consumer banking revenues.